Blog: Cosmonauts and the future of the economy

Wandering through a superb new exhibition at the Science Museum - Cosmonauts - a strange realisation occurs. This story of the Russian (and US) space programme is essentially a history of postwar productivity. First there is the spacecraft. The materials used form the basis of the modern car and aerospace industries and many other things besides. Then there is the computing, navigation and communication equipment - we carry that in our pockets in the form of smartphones. Our economies are underpinned by the computer revolution. Even the space suits have an economic dimension. That element of the exhibition is like walking into a North Face outlet.

Just how much economic growth did the space race catalyse? It's incalculable. And we are still reaping the benefits. Clay Christensen details disruptive and empowering innovation. Both forms - new technology and mass job creation - are evident in Cosmonauts. 

We stand on the precipice of a new wave of disruptive technologies. Artificial intelligence, the Internet of Things, cheap advanced robotics, big data, intelligent automation, green and bio-energy, biotech, nanotech, and fintech are in a race for disruptive impact of their own. Yet we are in a peculiar moment where the economic impact seems underwhelming as productivity struggles. As Robert Solow once famously quipped "you can see the computer age everywhere but in the productivity statistics." That was in 1987. The computer powered productivity leap then came in the 1990s before running out of steam in the mid-2000s as debt-fuelled asset bubbles began to pop. Are we about to see a similar surge?

Writers such as Martin Ford who we hosted at the RSA a couple of weeks ago (audio now available) argue that we are and, unlike the empowering nature of the Cosmonaut age, this time it will make large swathes of the workforce obsolete. This time will be different. If you are in any sort of work that can be routinised watch out. Ford produces a wonderful statistic in his book 'The Rise of the Robots'. Despite 40 million new workers, the total hours worked in the US economy is the same now as quarter of a century ago. A quick look at the UK economy suggests that the hours slowdown is not as stark as that but there has been a decline in average working hours and the phenomenon of underemployment is becoming more prevalent.

There are many different pathways from here. My best guess is that we will see a productivity surge in coming years but that it will be uneven. There will be high growth in the high skill, high wage, high productivity parts of the economy. There will also be a growth in the low skill, low wage, insecure parts of the economy. How they will balance out is anyone's guess – and as research by Deloitte has shown, technology has up to this point tended to create more jobs that it has destroyed in aggregate (and good quality jobs at that). So I don't believe we are facing mass unemployment. Instead, there is a high risk of mass underemployment. 

Every age has its technological leaps; the smart societies build new institutions to embed tech change in social wellbeing. They humanise technology. But we are behind the curve. There can be a virtuous wave of innovation. Actually, the wave is more like a circle and would look something like this:

Tech innovation -> Economic growth -> legal, institutional and regulatory response -> social benefits -> further tech innovation ->

We seem to be at stage two of a new tech surge but the waves could be getting shorter and we don't seem to be getting onto waves three and four with enough consistency. The circle is getting smaller. There is a real risk that because public policy and institutional evolution is slow, we fail to ensure the empowering aspect of technological innovation other than in the consumer space. And that is not enough - people also have to earn a living. 

Workers are also consumers after all. Without earnings growth we may never see the full productive potential of new innovations. The economy is a social system at its heart. And yet we think of it in machine-like terms and that is a huge mistake. This is not to ignore environmental questions - the adoption of green tech relies on getting the social balance right also.

So we know that there are drags on demand that undermine productivity. Productivity has not grown in almost a decade in the UK and has increased only slowly by historical standards in the US. We also know that there is a creativity deficit. Our own research backs this up. Our Power to Create survey picked up a section of society who believe they have more to contribute creatively but feel 'held back' - they lack confidence, support from government, finance, or specific training. This is 20% in our survey. Only 11% of the population are 'confident creators'. 

Finally, we know that earnings growth has become decoupled from productivity growth. So even if there is a short-term surge it may not be sustained and not enough people will benefit from it - the test of any sustainable economy. All of this is happening because we are failing to ask the right questions about how to sustain a human economy, let alone come up with some convincing answers. 

It would be easy to list a series of policy ideas at this point. However, there is a challenge about how we think about the economy to be addressed before getting onto what we might think (watch this space). Matthew Taylor encouraged us to ask questions about the human economy in his chief executive's lecture from earlier this year. That's a good place to start in the discussion about productivity. The question is how do we engender disruptive technologies that have social benefit and protect the social basis of economic life?

So yes, we would invest in the underpinnings of productivity - science, infrastructure, a sensible industrial policy, and high level education excellence. But alongside that we need to think about the human economy - the sharing economy in broad terms. This has two aspects: a wider distribution of the benefits of productivity growth and a parallel economy of lower productivity but significant social reward.

We will have to think about how the high productivity economy can fulfil wider obligations - for example, new worker networks, spreading asset ownership, taxation, and new forms of public interest corporations.

In parallel, a new system of support would be cultivated. It would give people a chance to adapt. This would be supported by a universal basic income and support for living wages where possible. A whole swathe of new institutions to support transitional learning and networks of support for work and life are needed (see our proposals for new 'cites of learning' for one such set of institutions). 

Taken together, these institutional innovations free people to engage in different forms of exchange - social exchange such as creative pursuits, peer-to-peer learning, civic action, and caring. They mitigate the downsides of any tech-induced underemployment and help people to adapt. They put in place a sounder foundation for a social and economically viable future.

Past ages have imagined and created social institutions to enhance human welfare amidst technological change. Why are we so slow on the uptake? The Cosmonauts were remarkable. But we can do even better. We can become social cosmonauts. And fulfil our collective social and economic promise in the process.

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